It is the fifth assassination attempt foiled in last month, said Israel Police.
The group, from Beit Safafa, a village under Israeli control straddling East and West Jerusalem, had been recruited, like others revealed this year, through social networks.
Headed by a 23-year-old man who Times of Israel named as Rami Alian, they had been ordered to assassinate a nuclear scientist and a mayor from one of central Israel’s largest cities.
The Iranian handler had tasked him to recruit other members, who were all aged 19 to 23, without previous convictions.
Like other plots uncovered this month, the tasks had begun with minor operations such as painting graffiti against the government.
"The suspects carried out tasks of spraying graffiti in various places in Israel, setting fire to vehicles in the Ein Kerem area of Jerusalem and gathering intelligence," said Israel Police.
"The plot also included blowing up a police car and throwing a grenade at a house, all in exchange for $52,000," the statement by the police added.
The police explained that some of the suspects arrived near the residence of the senior scientist and, in exchange for $130, photographed the location with the intention to carry out the assassination.